Affiliate

Definition:

Defined in Rule 405 of the Securities Act as a person or entity who controls, is controlled by, or is under common control with, an issuer. Whereas foreign securities laws often provide strict guidelines for determining Affiliate status, the Securities Act requires such determination to be made on a case­-by-case basis according to the specific facts and circumstances.

The SEC has stated that, generally, Affiliates of a Registrant would include Executive Officers, directors, and shareholders who hold 10% or more of the total shares, as well as their Affiliates. Affiliates generally have some control over the company and therefore are deemed to have access to Insider Information; hence, they are often subject to trading restrictions on securities of the issuer due to potential Insider Trading concerns. Affiliates are also subject to resale restrictions on securities of the related issuer. In determining whether someone is acting as an underwriter, the Securities Act takes into account purchases from an Affiliate of the issuer.

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